Thread: Hershey's Profit Doubles As Sales, Margins Surge

APRIL 22, 2010, 8:23 A.M. ET.

Hershey's Profit Doubles As Sales, Margins Surge

By RACHEL ROSENTHAL

Hershey Co.'s first-quarter earnings doubled as the maker of Kisses and Reese's Peanut Butter Cups continued to profit from belt-tightening and price hikes, though sales volumes also climbed.

Results handily topped analysts' expectations and the company boosted its 2010 forecast. It now expects double-digit profit growth and a sales increase of at least 6%, compared with prior view of up-to 8% earnings growth and a sales gain of 3% to 5%.

The chocolate maker also announced plans for an ad-spending boost that will be 10 percentage points more than its previous forecasts, putting this year's growth at 35% to 40%.

As the company faces greater competition from its bigger rivals, Hershey may seek to nurture its sweet tooth for acquisitions. In February, Chief Executive David West said he had secured board support as Hershey considers international deals and joint ventures.

The company now trails Kraft Foods Inc., the world's largest confectioner after Cadbury accepted its $19 billion takeover offer in January, and Mars, whose 2008 purchase of Wm. Wrigley Jr. Co. pushed Hershey into fight for shelf space in the U.S. Hershey had weighed a bid for Cadbury but didn't make an offer.

Hershey posted earnings of $147.4 million, or 64 cents a share, compared to $75.9 million, or 3 cents a share, a year earlier. The prior year included 5 cents a share in charges. Net sales rose 14% to $1.41 billion.

Analysts expected earnings of 47 cents a share on net sales of $1.29 billion.

Gross margin surged to 42.2% from 35.6% as manufacturing costs only rose slightly despite the increased sales.

Both Moody's Investors Service and Standard & Poor's Rating Services recently raised their outlooks on Hershey to stable, citing improved operating performance. Moody's also pointed to the company's more predictable growth strategy, but warned that its appetite for aquisitions could indicate willingness to accept a downgrade.

—Kevin Kingsbury contributed to this article.
Write to Rachel Rosenthal at rachel.rosenthal@dowjones.com

http://online.wsj.com/article/SB1000142 ... theadlines

Didn't Hershey move from Hershey, PA to Mexico to take advantage of the cheap labor?